Seasonal factors may also be factor in declining oil prices

Oil prices rebounded slightly from earlier losses in the session on Tuesday, despite a report from the International Energy Agency forecasting that supply would outpace demand in 2018.

By 1:44 p.m. EST, Brent crude was up 120 cents to $62.79 after hitting a two-month low earlier in the day. US West Texas Intermediate was even at $59.29/barrel. The Canadian Crude Index rose to $33.70.

“I think there are a lot of people who are praying that last week’s collapse in crude…was some anomaly, and that as soon as the stock market recovered, the crude market would recover with it,” Walter Zimmerman, chief technical analyst at United-ICAP told Reuters.

“So far its looking a little ominous but WTI has not broken down,” Zimmerman said. He added US WTI would have to decline more to enter a bear market.

Rising US production prompted the IEA to revise its outlook for 2018. The agency said that despite increased global demand of 7.7 per cent, increased output from the United States may outweigh these gains in demand.

“U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth,” the IEA said.

By late 2018, US crude production is expected to top 11 million barrels per day (b/d), a year earlier than the US Energy Information Administration predicted. This is one year earlier than previously forecast.

On Monday, OPEC reported it expects world oil demand to increase by 1.59 million b/d this year to 98.6 million b/d, an increase of 60,000 b/d from the cartel’s previous outlook.

Analysts say seasonal demand reductions may also be affecting oil prices, according to a Reuters report.

“A driving force behind the next few weeks of pricing vulnerability stems from the current peak in U.S. refinery maintenance season,” Michael Tran, commodity strategist at RBC Capital Markets, wrote in a research note.

Later on Tuesday, the American Petroleum Institute will publish its crude inventory estimates. and on Wednesday morning, the US EIA will release its weekly inventory data.